“Data-Driven Thinking" is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is by Josh Herman, vice president of partner and product strategy at Acxiom.

Addressable television has arrived, but where is it taking us?

With a reach of more than 40 million households and four major operators delivering household-addressable advertising, it’s safe to say we’ve reached the point of critical mass.

And with this ability to effectively deliver household-specific marketing messages to television viewers, there are subtle, new signs on the horizon for the maturation of television commerce (tcommerce) that suggests we won’t have to tell the same joke about Rachel’s sweater a quarter of a century from now. These signs are coming from both inside and outside of the subscription TV industry.

Rachel’s sweater refers to the character on the television series “Friends,” when Rachel’s sweater came to represent an industry vision where, with the click of the remote control, consumers could purchase the sweater Rachel wore during an episode, or whatever the desired product may be. This longstanding vision is the logical, evolutionary step from ecommerce into tcommerce, when commerce is conducted through your TV, not just inspired by what you see on TV.

Ecommerce has matured to the point where it’s a dominant feature on the retail industry landscape and a requirement for brick and mortar stores. Ecommerce sales could rise from 8% to 10% of total US retail sales to reach $370 billion by 2017, Forrester projects.

One of the first challenges the largest cable and satellite TV providers had to overcome was achieving scale and consistency across all legacy systems. This was no small task considering the largest cable TV operators grew by acquiring and aggregating many small cable TV systems, creating a crazy quilt of video and set-top box technology that had to be tamed and standardized to operate as one environment. But to get to tcommerce, these systems had to be interactive at the household level, and this is where one of the key signs has shown up at scale this year.

Millions Of Households

When combined today, the largest satellite and cable TV providers can now deliver household-level advertising to more than 40 million households, reaching nearly 100 million people. This is enough scale for the largest ad agencies and advertisers to pay attention.

And match rates for an advertiser’s customer relationship management database file are commonly very high because the quality of the data is so strong. That strong match rate becomes a critical linchpin to permissibly mapping those same consumers for targeting in other channels. The combined power of addressable TV and addressable mobile advertising, as an example, is only exciting when the overlapping universe is at scale.

But giving the advertiser better control over who receives the ad at the TV household level is only half the equation. The “return path” of the advertising data must be in place to keep track of which households saw which ad and eventually bought a product shown for sale in the show. And the satellite TV providers had to separately build out their household-level return path universes as well.

A good sign of progress is that the privacy-permissible return path of the data to answer the first two questions is in place for those 40 million households. Which household saw which ad? The confidence this gives advertisers, to know precisely which households they wanted to reach and whether or not they actually saw the TV ad, is critical for entering the next stages on the path to tcommerce. Advertisers need to know whether the ad played a role in inspiring a sale that took place offline or online. Helping facilitate the actual transaction is where video advertising is heading. You may have noticed I stopped using the term “TV” in favor of “video.”

Market Pressure

Once the CMO makes the investment in the production of the video creative, she wants to get a return on that upfront expense everywhere she can, regardless of the screen on which it plays.The new video-delivery competitors, including Amazon, Netflix and Google, are putting pressure on the subscription TV service providers to make the move to tcommerce. These companies bring a legacy of direct-to-consumer relationships and a heritage of facilitating and managing the delivery of entertainment content and purchase transactions to a household or individual account. They are also making investments in producing video entertainment content, which is where it all comes together: engaging entertainment with addressable advertising, and managing transactions and delivery of products to consumers.

TV remains the most powerful medium for engaging consumers and inaugurating tons of digital interaction. Layering on the power of addressable TV ads at scale and the privacy-permissible return path of data to know which advertiser target segments saw the ad and bought means the race for tcommerce or vcommerce is on. A more seamless, interactive world for consumers will be here before Rachel from "Glee" is the punch line for when tcommerce will arrive.

1 Comment

Is the targeting you’re speaking of truly addressable given it’s at the household level?

If a household of 3 has a child and two parents with very different viewing and purchasing habits, how can you attribute the impression to that person? It seems like if Gillette wanted to get an ad in front of the man in the household, they could have a 1 in 3 chance of reaching that person (assuming TV watching habits were equal).

I still think you have a better chance of reaching the audience you’re looking for by targeting TV shows that have a high propensity for a certain audience to tune in. Although this is not 100% accurate, it beats the 1 in 3 chance I mentioned above. Targeting TV shows and times to reach an audience also scales better. Perhaps I am missing something though and there are other mechanisms you’re speaking of to reach the individual within the household.